Bombed-out tailor Bagir (BAGR:AIM) slumps 22.5% to 7.75p as another profit warning overshadows the outlining of a clear recovery plan. This is another setback for the Israel-headquartered micro cap, notorious for issuing an earnings alert just weeks after listing on Aim last year (15 Apr).
Today's year-end update from Israel-headquartered Bagir, which supplies men's and women's suits and jackets for the likes of John Lewis and Brooks Brothers in the US, is a mixed bag. The bad news is the devaluation of the pound/dollar exchange rate during the final quarter of 2014 means sales will weigh in at around $97 million and adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) will be 'marginally below expectations'.
Both metrics are below the previously-forecast range and further downgrades ensue. N+1 Singer doubles its 2014 forecast loss to $3 million and the broker now expects $1.6 million losses for 2015 rather than a $1.4 million profit.
The good news is Bagir has begun to replace the drop off in volumes with biggest customer Marks & Spencer (MKS) that prompted last May's profit warning. Sales from other new and existing customers in the UK and US grew 30% last year.
Furthermore, the tailor says year-end net debt was lower-than-forecast at $14 million and that banking covenants have been reset. The Aim minnow has also begun a two-year recovery plan to cut costs and drive through operational improvements.
The strategy will focus on growing its quality tailored menswear private label business, developing its brand licensing activities on a royalty basis, as well as a management and production restructuring drive. This will include a reorganisation of its new Ethiopian factory, which is expected to provide Bagir with a strong competitive advantage due to its duty free exports to the EU and US and low production costs.